Throughout East Asia, the growth process and its sources are changing in a number of important respects, especially for middle and higher income economies. Growth will increasingly come from the strength of innovative activities in these economies instead of factor accumulation as in the past. Recent research suggests that such innovative activities, especially in producer services and the creative industries, are concentrated in high-tech clusters in globally linked cities. The development of such cities is influenced by ongoing structural changes and initiatives by governments and firms. This paper explores these issues and suggests how policies and institutions can induce and furnish an urban environment that supports innovative activities that in turn lead to rapid growth.
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